Martin Plus Ge Equals Cutbacks

The Giant Merger Has The Company Re-evaluating Its Facilities And Its Work Force.

April 11, 1993|By Richard Burnett of The Sentinel Staff

Corporate mergers thrill Wall Street but send a chill through Main Street. So it is with Martin Marietta Corp.'s merger with General Electric Aerospace.

The merger has created a high-tech behemoth with 94,000 employees and annual sales of more than $10 billion - the largest aerospace electronics company in the world.

To Wall Street's delight, Martin Marietta's stock has soared more than 28 percent since the merger announcement. Prices have risen from $57.625 on Nov. 23 to $74 a share last week, when the merger was approved.

But the merger will eventually shut down plants and may put as many as 15,000 engineers, accountants, electronics assemblers, clerks and other employees out of work.

State and local officials from Florida to New York have mobilized to prepare for the approaching storm now forming in the executive conference rooms of Martin, based in Bethesda, Md.

In Volusia County, for example, officials are afraid Martin will close a Daytona Beach plant and move the operation to Orlando.

Indeed, when Martin unveils its merger plan in the coming months, odds are the Orlando area will line up in the winner's column, analysts said.

GE Aerospace plants in the Northeast are most vulnerable to closing in a merger because of their high business costs, said Wolfgang Demisch, a defense analyst with USB Securities Inc., a New York brokerage.

Orlando's lower costs and Martin's abundance of available space in Central Florida make the area a good candidate for the relocation of costlier operations elsewhere, Demisch said.

He compared the situation with Hughes Aircraft Co.'s relocation of its missiles division from Southern California to Arizona. Hughes, based in Los Angeles, acquired the missiles unit from General Dynamics Corp. last year.

''It is quite possible that over time Orlando could become for Martin what Tucson has become for Hughes, a center for engineering and production,'' Demisch said.

Although Martin plans to move some missile production work this year from Orlando to a new site in Alabama, Demisch said Orlando stands to benefit from the GE Aerospace facilities consolidation.

''I don't think they will put all their eggs in one basket, but Orlando will get a fair share of business as a result of this merger,'' he said.

Defense analysts estimate that in the next 12 months, Martin will eliminate 10,000 to 15,000 jobs, or 10 percent to 16 percent of the combined work force of Martin and GE Aerospace.

Plant closings and layoffs are a certainty. Martin chairman Norman R. Augustine has made that clear in statements to the press.

What remains unanswered is where and how many.

The uncertainty has galvanized economic development officials in the Northeast, site of more than a dozen major GE Aerospace plants.

''We're certainly concerned about it,'' said Bruce Stebbins, economic affairs director for western Massachusetts, where about 2,000 work at a GE Aerospace plant in the city of Pittsfield. ''We recognize what a shrinking defense market means.''

Pittsfield, a city of about 60,000, has already taken its share of hits from defense cutbacks as GE Aerospace has cut about 6,000 jobs there since the early 1980s, Stebbins said.

When the merger was announced in November, state officials launched their outreach to Martin Marietta, he said. The mayor set up a task force to work with the company, he said.

Officials have called on Sen. Edward Kennedy, D-Mass., to use his influence as a member of the Senate Armed Services Committee to help them.

Other Northeast states have focused on offering new incentives to keep Martin and other industries from leaving.

In Vermont, for example, officials have proposed some of the highest corporate tax credits in the country for jobs creation and industrial expansion, said Bill Shouldice, the state's deputy secretary of economic development.

If the proposal is passed by Vermont legislators, companies would receive a tax credit equal to 100 percent of their investment in expansion or relocation, he said.

Tax credits in other industrial states are miniscule by comparison. Florida, while offering lower corporate tax rates, does not offer a tax credit.

''In a merger of this kind, we know that a company like Martin will be looking at the costs and benefits of its facilities,'' he said. ''And we know they are looking at our plant in Vermont, but we are confident it will hold up well under the analysis.''

Against the aggressive new incentive tactics of the Northeast, Florida offers its usual lineup of virtues - low corporate tax, no state personal income tax, lower labor costs and good quality of life, state officials said.

But an effort to pass a new defense investment tax credit failed in the recent legislative session.